On Thursday, March 7, 2019, the Wage and Hour Division of the U.S. Department of Labor (DOL), published a long-awaited Notice of Proposed Rulemaking (NPRM) to revise the “white-collar” overtime exemption regulations and replace the Obama Administration’s controversial proposal.
The DOL’s proposed rule increases the minimum salary threshold required for workers to qualify for the Fair Labor Standards Act’s (FLSA) white-collar exemption from $23,660 per year ($455 per week) to $35,308 per year ($679 per week). The previous rule, which was proposed in 2016 under the Obama Administration, would have raised the threshold to $47,476 per year ($913 per week). That proposed increase never came to fruition as it was temporarily enjoined by a Texas federal judge in November 2016 before being permanently blocked in August 2017.
Under the new rule, workers making less than $35,308 per year will be automatically eligible for overtime pay for all hours worked beyond 40 hours a week. The DOL’s rule also proposes regular increases to the threshold every four years, after a notice and comment period is held. The Obama Administration rule also proposed regular increases, albeit without a notice and comment period. The rule does not make any changes to the so-called “duties test” – the second part of the eligible-for-overtime inquiry which involves the job duties of the worker.
It is estimated the new rule, should it take effect, will make an additional one million workers eligible for overtime pay. While this number is staggering, it is still only one-quarter of the estimated number of employees whose exempt-status would have been affected by the Obama Administration’s rule.
The proposed rule is open for public comments and it is anticipated it will take effect in January 2020. Employers should begin making preparations now to comply with the proposed threshold increases by looking at their employee rosters and determining which employees, if any, may need their exempt status to be reevaluated. If you have such employees, the next question is do you move those employees to hourly or is it worth increasing their salary. This is a complex issue that needs time to properly evaluate. In the meantime, we will continue to monitor and provide you with updates.
Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
